The Nasdaq Composite bounced on Thursday, a day after dipping into correction territory, as investors rotated back into technology names.
The Nasdaq, which is home to many of the market’s biggest tech names, ended Wednesday more than 10% below a record set in November, indicating a technical correction. The index was nearly 2% higher on Thursday.
The Dow Jones Industrial Average gained 430 points, or 1.2%, on Thursday. The S&P 500 added 1.4%. The small-cap benchmark Russell 2000, which hit a 52-week low on Wednesday, rose 1.8% on Thursday.
Technology stocks led markets higher on Thursday. Zoom Video added nearly 4%, Microsoft rose 2.5%, Meta Platforms popped nearly 3%, and Tesla was up more than 4%. Streaming giant Netflix rose 1.7% ahead of its quarterly report after the bell on Thursday.
Stocks moved higher even as government bond yields remained elevated, part of a market repricing as the Federal Reserve gets set to tighten monetary policy.
The central bank meets next week, with markets indicating just a slight chance of action on interest rates. However, traders have fully priced in the first of what is expected to be four 0.25 percentage point hikes through 2022.
The two-year Treasury, which is most closely tied to Fed rate policy, most recently yielded about 1.04%, while the benchmark 10-year note was at 1.84%.
Unemployment data on Thursday signaled the surge in omicron could be hurting the recovery.
Jobless claims for the week ended Jan. 15 totaled 286,000 for the week, their highest level since October. The read was well above the Dow Jones estimate of 225,000 and a substantial gain from the previous week’s 231,000.
In regular trading Wednesday, the Dow fell for the fourth day in a row, by 339 points, or 0.9%. The S&P 500 also fell 0.9%. The Nasdaq Composite closed down by 1.15% and now sits about 10% from its November record.
This year’s turbulence in tech stocks, set off by a spike in yields in the first week of January, continued Wednesday as the 10-year U.S. Treasury yield hit a high of 1.9%. It started the year at about 1.5%.
Brad McMillan, chief investment officer at Commonwealth Financial Network, acknowledged that the turbulence could last for some time but said investors shouldn’t panic about interest rate increases and that they’re normal as the economy returns to normal.
“The economy and markets can and do adjust to changes in interest rates,” McMillan said. “This environment is a normal part of the cycle and one we see on a regular basis. The current trend is perhaps a bit faster than we’ve been seeing, but it is a response to real economic factors–and, therefore, normal in context.”
For the week, the Dow is down about 1.2%. The S&P 500 has lost 1.4% since Monday. The Nasdaq is the biggest loser, down 1.8% this week.